Question

Market data obtained from S&P Capital IQ is shown below: VMX Ltd has a beta of...

  1. Market data obtained from S&P Capital IQ is shown below:
  • VMX Ltd has a beta of 1.3 and debt-to-equity ratio of 0.5
  • Yield on long-term Singapore government bonds = 3%
  • Yield on AAA-rated corporate bonds = 5%
  • Bond price issued by VMX Ltd = $1,150 (6% coupon, paid semiannually, expiring in 8 years)
  • Inflation rate = 1%
  • Market risk premium = 6%
  • Corporate tax rate is 17%.

Solve for VMX’s weighted average cost of capital.

(Approx 400 words.)


1.33% for upto 3 years to 1.75% upto 30 years.

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